When Philip Hammond makes his second budget address of the year next Wednesday, he will undoubtedly have the Prime Minister’s new favourite phrase “why can’t people do their jobs?”, in the back of his mind. Perhaps he will be wondering how long he’ll be allowed to continue doing his.
This Budget is being viewed as the last great audition for Hammond to remain as Chancellor. Another National Insurance Contributions debacle, or a calamitous Osborne-esque omnishambles, will likely to see him leave 11 Downing Street. Some have argued that the forthcoming budget has been the only thing keeping the Chancellor in place, preventing a more comprehensive reshuffle after two cabinet ministers were forced to resign in as many weeks.
Whilst there are a number of prospective candidates looking to move next door to Mrs May, that is possibly a story for next week. For now, let’s take a look at what we can expect from the budget.
Post-election budgets have traditionally seen the hardest cuts to public services and the biggest impact on the spending power of working families, meaning the Chancellor often attempts to provide a sweetener to offset any increased discomfort.
Given the importance of securing a new generation of voters ahead of the next election, the Chancellor’s widely speculated plans to reduce Stamp Duty for first-time buyers would be an attempt to win over this important demographic.
Perhaps the biggest pill to swallow, particularly for small businesses, will be the expected reduction of the VAT threshold, which could raise a further £2 billion for the Treasury. While Hammond would welcome the extra money as he looks to offset the cost of the deal with the DUP and the continued payments to the EU, it will be a blow to small businesses.
With small businesses bearing the greatest burden of the VAT changes, there have been rumours from the Treasury about steps to mitigate the impact of business rate increases in April 2018. One suggestion is that bringing forward a change in the price index used to determine business rates could provide a significant reduction.
Elsewhere, there are suggestions that the Government will seek to launch a new review of business rates to target internet retailers like Amazon and eBay, in a bid to rebalance disparities between the high street and online. Measures are also expected to ensure that sellers using online marketplaces pay the correct amount of VAT.
However, Hammond is seen as the wrong man to take this forward, with a more modern and tech-savvy Chancellor likely to be favoured to tackle this issue.
In contrast to potential good news stories around Stamp Duty, the Chancellor looks set to introduce a higher duty for diesel cars, either in the form of a sales duty for older models or an increase in fuel duty. Whilst this could be highly damaging to the Government’s standing with the freight industry, it would help burnish the Conservatives’ green credentials, with the environment an increasingly important issue for younger voters -whilst also supporting the long-term effort to transition the UK away from fossil fuels.